Wednesday 9 May, 2018

Por Jayson McNamara

In the context of ongoing political and economic nervourness, the entity was forced to deny rumours that the economist had met with Central Bank governor Federico Sturzenegger.

Cavallo was Economy minister under presidents Carlos Menem and Fernando de la Rúa. He is largely blamed for the country's 2000/2001 corralito financial crisis.

The Bank confirmed that the former public official had instead attended a meeting about the upcoming G30 summit, which in May will bring together bankers, former central bank governors and former economy ministers of the world’s richest countries. Cavallo is the only Argentine in the select group, presided over by former US Federal Reserve chief Paul Volcker. Sturzenegger will be the event’s host.

TENSE RETURN

The economist made a tense return to the public spotlight around two weeks ago, and just days before the peso plummeted, offering some arguably unwanted advice to the government.

“It is an enormous danger for the Central Bank to continue emitting debt”, he added. “Just as capital comes in, it can also flow outward. The Central Bank must pay: either by raising its (interest) rates or printing (cash)”, he said.

“A (situation similar to the crisis in) 2001 could happen in a few years if they continue with this exaggerated debt financing policy and they do not reduce the fiscal deficit”, he added.

The government sent Commerce Secretary Miguel Braun on a media blitz to downplay Cavallo’s comments and urge calm.

Central Bank chief Sturzenegger is considered a disciple of Cavallo’s. The pair meet regularly. “I hold Sturzenegger in high regard but I do not advise him. Actually, I usually criticise him,” Cavallo said after an image of him entering the Central Bank went viral in late 2017.